BULLINK Portfolio Insight: Earnings Surprises Await for Peak Season
1Q25 Review: Exceptional Performance from Korea, China, and the U.S.
Kolmar Korea has astonished the market by exceeding expectations in its first-quarter earnings for 2025. The company reported revenue of KRW 653.1 billion, marking a significant year-over-year growth of 14%. Furthermore, operating profit skyrocketed by 85% YoY to KRW 59.9 billion. This robust performance was primarily driven by strategic operations across key markets including Korea, China, and the U.S.
Korean Market Dynamics:
- Domestic sales surged to KRW 274.3 billion, witnessing an 11% increase compared to last year.
- A significant driver was the remarkable performance of sun care indie brands, which outpaced traditional legacy brands.
- The sun care segment is anticipated to amplify in Q2, aligning with its peak season, providing a promising outlook for top-line enhancement.
China's Strategic Turnaround:
- In a surprising turnaround, China reported a 20% increase in sales, amounting to KRW 41.6 billion. Operating profit also rose by an impressive 72% YoY.
- The recovery from last year’s negotiation setbacks in sun care orders marks a potential prolonged growth period.
U.S. Growth Momentum:
- The U.S. market maintained its rapid growth trajectory, with an astonishing 210% YoY increase in sales, reaching KRW 21.7 billion.
- New customer acquisitions and the launch of new products were pivotal factors contributing to this remarkable growth.
- The U.S. operation has sustained profit improvements for two consecutive quarters, indicating robust future potential.
Investment Thesis: Attractive Earnings and Valuation
Key Catalysts:
- The current success in sun care and the strategic expansion in the U.S. are driving the company's stock momentum.
- With a burgeoning order book during the sun care peak season, and domestic margins expected to reach record highs in Q2.
- The completion of a second U.S. plant in June further enhances the long-term growth prospects with ongoing discussions to increase onshore production post-tariff adjustments.
Target Price Adjustment:
- Reflecting the favorable outlook, the price target has been elevated from KRW 92,000 to KRW 110,000.
- This is underpinned by increased expectations (25F domestic OPM of 12.5%) combined with market valuation enhancements.
- Currently valued at 14x 12-month forward PER, the stock offers an affordable and attractive buy opportunity.
Kolmar Korea's strategic execution across regions and its agile response to market dynamics underscore its capacity for sustained growth, positioning it as a compelling investment within the cosmetics and skincare industry. Investors are encouraged to maintain their positions in anticipation of further value creation.
Note: All financial figures are in KRW unless stated otherwise. Information is based on the latest available data as of October 2023.
